The Rally is Unavoidable: Roku
Roku is the hardware company that manufactures digital media players and provides access to streaming media content. Its shares lost 90% of their peak prices. The firm was initially part of the streaming giant Netflix with which it had incorporated some digital media player producers in order to avoid competition with Apple TV and other streaming peers. But later Roku became an independent company that offered smart TVs built-in Roku functionality. The major source of revenues is advertising. The ad market was very weak in 2022, hampered by geopolitical tensions. But it is now recovering, fueling hopes that ad revenues will improve soon. Anyway, advertising revenues are unlikely to contract any further so no major impact on stock prices is expected. Thus, future guidance is of paramount importance. The company’s management expects earnings to return to a positive territory in 2024 with EBITDA margin to go up to 10% (the company delivered EBITDA margin at 17% as the highest on record). These developments will certainly boost stock prices, as margins play the most important role for investors after revenues are expected to rise by 10% in 2023, which is less than in 2020-2021.
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